The number of D&O claims is rising - but why are more and more managers (including former managers) being targeted? This article provides an exclusive insight into current developments in manager liability: from typical project errors to antitrust violations and the recovery of state aid. With data from over 500 claims and concrete reasons for liability, the analysis shows how quickly a management error can turn into a risk worth millions - and why a good corporate strategy is more important today than ever.

Legal violations related to to delayed insolvency filings represent the most frequent basis for managerial liability claims. At the same time, the number of insolvency proceedings is once again on the rise. For this reason, our blog from time to time makes legal forays into practical aspects of delayed insolvency filing matters that may carry significant weight in court proceedings or settlement negotiations. The following post is the fifth in this series. It addresses a decision of the German Federal Supreme Court, pursuant to which managers remain liable for delayed insolvency filing even after end of their office and for contracts with new creditors. This is a substantial extension of liability and also has an impact on D&O insurance.

Legal violations due to delayed insolvency filing constitute the majority of cases in manager liability. Therefore, we periodically make legal forays into this topic on our blog. The focus of our fourth foray is a ruling handed down by the German Federal Court of Justice (BGH) dated January 25, 2025, which addresses one of the key issues in the liability of company directors for payments made when insolvency is imminent—namely, the "cessation of payments" as an indicator of insolvency. The ruling confirms: The concept of "illiquidity" is complex, proving it in court is challenging, and it remains a central issue in many disputes in this area.

Claims against managers for reimbursement of payments made to creditors after the company should have filed for insolvency are attractive from the perspective of the illiquidity administrator: Such claims can quickly accumulate into significant amounts and are usually covered by D&O insurance. From time to time, our blog therefore makes legal forays into practical aspects of this liability area. The following, third of these forays - like foray 2 - looks at the concept of illiquidity and takes up the new IDW S 11 standard of the German Institute of Auditors. There, the IDW only allows financial status to be used to calculate insolvency, increases the percentage “coverage gap” on this basis compared to the German Federal Supreme Court (BGH) and warns that a calculation based on the BGH would entail a risk of liability. In contrast, we set in our 2nd foray of 6 October 2024 that the IDW's position is not supported by the procedural context of the BGH rulings to which the IDW refers. What is more, the IDW's position also contradicts the substantive assessments underlying the fundamental rulings of the BGH from 2005 and 2017 regarding illiquidity. To follow IDW S 11 is thus not without risk.

Two new forays on our Blog are dedicated tot the concept of illiquidity. The term is of pivotal importance, and one would think that enough time has passed since 01 January1999, when the German Insolvency Act (Insolvenzordnung [InsO]) came into force, to clarify the details. Indeed, the German Federal Court of Justice (IXth Senate) issued a fundamental ruling on the notion of illiquidity in 2005. According to ruling, illiquidity is determined on the basis of a combination of the static (calculation date related) figures of a status with the dynamic figures (related to the 3 weeks following the calculation date) of a financial plan. Pursuant to recent decisions of the Federal Court of Justice, however, under certain circumstances a series of financial status is sufficient to "prove" illiquidity, a legal tomography so to speak, which is not intended to provide a picture of the financial infarction by means of a dynamic finacial plan, but by a „layer-by-layer“ representation. So does the "proof" change what is to be proven? The question is weighty, since the dynamic 3 week financial plan has substantial impact on the determination of the illiquidity, both in legal and calculatory terms.

Now the new standard IDW S 11 of the Institute of Public Auditors bases its guidance for the calculation of illiquidity on a series of financial status, by the same token increases the relative (in percent) "coverage gap" compared to the calcualtion under the formula of the Federal Court of Justice and even warns that a calculation according to the Federal Court of Justice carries a risk of liability for legal practitioners and advisors. That is not to be followed.